Policy and Systems

Pension from a Railroad Employer

The supplemental annuity is reduced by the amount of a pension from a railroad employer that is based on the employer's contributions. Notify the RRB promptly if you begin receiving a railroad pension or receive a lump-sum distribution from a railroad pension. Not doing so will cause your supplemental annuity to be overpaid.

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Annuity Deductions for LPE

Earnings reductions for LPE occur at any age, even after attaining Full Retirement Age. There is no Annual Earnings Exempt Amount for LPE. Even work for minimum pay may be LPE.

Any LPE earnings received by an employee annuitant for service in or after the month the annuity begins, will reduce the amount of the employee's Tier 2 component, the employee's supplemental annuity, if any, and the spouse's Tier 2 component. The LPE work deduction is $1.00 for every $2.00 earned, but not more than 50% of the Tier 2 components and supplemental annuity.

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LPE Exceptions

Some types of non-railroad employment are not counted as LPE. These types of work do not affect payment of your Tier 2 component or supplemental annuity. These exceptions are:

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Spouse/Divorced Spouse Annuities

Overview

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Last Pre-Retirement Non-railroad Employment

Your Last Pre-Retirement Non-railroad Employer (LPE) is defined as any non-railroad individual, company or institution for whom you are working on your annuity beginning date (ABD) or for whom you stopped working in order to receive an annuity. This includes work for a Canadian railroad that is not covered under the Railroad Retirement Act and work as an elected or appointed public official.

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When to Report Earnings

You should report your earnings when you begin or end nonrailroad employment and expect to earn more than the Annual Earnings Exempt Amount to allow timely adjustment or your annuity. Also report if you will earn substantially more or less than you earned in the previous year.

When you tell us that you have begun non-railroad employment or changed your earnings from the previous year, we apply temporary deductions to your annuity based on the amount you expect to earn.

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What Earnings Count for Tier 1 Reductions

Tier 1 earnings restrictions apply to gross earnings from your employment for others, plus any net earnings from self-employment. Your net self-employment amount is the earnings amount after business expenses that you report to the Internal Revenue Service (IRS).

Do not include as earnings, any money you received for reasons other than for work you performed. Gifts, interest earned, inheritance, pensions, and investment income do not count as earnings for this purpose.

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Tier 1 Reductions for Nonrailroad Earnings Before You Attain Full Retirement Age

This section only concerns Tier 1 component, vested dual benefit (VDB) or Special Guaranty reductions for age and service annuitants and their families. Tier 2 reductions for Last Pre-retirement Non-railroad Employer (LPE) and the rules for disability annuitants are explained in other sections of this publication.

Your Tier 1 components are not reduced for your nonrailroad earnings if you are receiving social security benefits.

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Non-railroad Earnings After You Attain Full Retirement Age

This section applies to annuities based on age and service and disability annuities. For months after you have attained Full Retirement Age (FRA), your Tier 1 component is not subject to reductions because of your nonrailroad earnings.

Determining Your Full Retirement Age

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Railroad Work

You must notify the RRB immediately if you go to work in the railroad industry. Do not wait for your employer to notify the RRB.

If you are the employee annuitant, your regular annuity, or any supplemental annuity cannot be paid for any month in which you work for a railroad employer. This law applies no matter how old you are or how much money you earn from that work.

If you are the spouse annuitant, your annuity is not payable for any month you work for a railroad or for any month the employee annuitant returns to railroad work.

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